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SEC FCPA Enforcement – 2019 Year In Review

SEC

Foreign Corrupt Practices Act enforcement, it’s not just about the DOJ.

Granted, as a civil enforcement agency the SEC’s sticks are less sharp than the DOJ’s, but the SEC also claims a significant piece of the FCPA enforcement pie (query whether it should – but that is a subject for another day – for instance as discussed in “The Story of the Foreign Corrupt Practices Act” the SEC wanted no part in enforcing the FCPA’s anti-bribery provisions).

This post goes in-depth into various facts and figures relevant to SEC FCPA enforcement in 2019.

[See here for a similar post for 2018; here for a similar post for 2017; here for a similar post for 2016; here for a similar post for 2015; here for a similar post for 2014; here for a similar post for 2013; here for a similar post for 2012; here for a similar post for 2011; and here for a similar post for 2010]

Settlement Amounts and Specifics

In 2019, the SEC brought 13 corporate enforcement actions and collected approximately $1.03 billion in those enforcement actions. (Note: this figure represents net FCPA settlement amounts after accounting for various credits or deductions in certain enforcement actions for related foreign law enforcement actions).

By way of comparison:

  • in 2018 the SEC collected approximately $382 million in 14 corporate FCPA enforcement actions;
  • in 2017 the SEC collected approximately $289 million in 7 corporate FCPA enforcement actions;
  • in 2016 the SEC collected approximately $1.07 billion in 24 corporate FCPA enforcement actions;
  • in 2015 the SEC collected approximately $114.8 million in 9 corporate FCPA enforcement actions;
  • in 2014 the SEC collected approximately $327 million in 7 corporate FCPA enforcement actions;
  • in 2013 the SEC collected approximately $300 million in 8 corporate enforcement actions;
  • in 2012 the SEC collected approximately $118 million in 8 corporate FCPA enforcement actions;
  • in 2011 the SEC collected approximately $148 million in 13 corporate FCPA enforcement actions; and
  • in 2010 the SEC collected approximately $530 million in 19 corporate FCPA enforcement actions.

The range of SEC FCPA enforcement actions in 2019 was on the high end $540 million (Ericsson) and on the low end $4 million (Westport Fuel Systems).

Of the 13 corporate enforcement actions brought by the SEC in 2019, 6 (46%) were SEC only.

By way of comparison, of the 14 corporate enforcement actions brought by the SEC in 2018, 9 (64%) were SEC only; of the 7 corporate enforcement actions brought by the SEC in 2017, 4 (58%) were SEC only and of the 24 corporate enforcement actions brought by the SEC in 2016, 14 (58%) were SEC only.

Of the 13 corporate enforcement actions brought by the SEC in 2019, 12 were administrative actions. In other words, there was no judicial scrutiny of 92% of SEC corporate FCPA enforcement actions in 2019.

By way of comparison, there was no judicial scrutiny of:

  • 100% of SEC corporate FCPA enforcement actions in 2018;
  • 100% of SEC corporate FCPA enforcement actions in 2017;
  • 83% of SEC corporate FCPA enforcement actions in 2016;
  • 89% of SEC corporate FCPA enforcement actions in 2015;
  • 86% of SEC corporate FCPA enforcement actions in 2014; and
  • 50% of SEC corporate FCPA enforcement actions in 2013.

In 2019,the SEC collected approximately $183 million in disgorgement and prejudgment interest in enforcement actions that did not charge or find anti-bribery violations. This is noteworthy because many question, and rightfully so, whether disgorgement is an appropriate remedy in cases that do not charge FCPA anti-bribery violations.  See here for a prior post on so-called “no-charged bribery disgorgement” cases.

By way of comparison:

  • in 2018 the SEC collected approximately $171 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases;
  • in 2017 the SEC collected approximately $2 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases;
  • in 2016 the SEC collected approximately $73 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases;
  • in 2015 the SEC collected approximately $45 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; 
  • in 2014 the SEC collected approximately $104 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases;
  • in 2013, the SEC collected approximately $208 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases;
  • in 2012, the SEC collected approximately $57.4 million in disgorgement and prejudgment interest in no-charged bribery disgorgement cases; and
  • in 2011 the SEC collected approximately $51 million in disgorgement and prejudgment interest in n0-charged bribery disgorgement cases.

The $1.03 billion the SEC collected in 2019 corporate FCPA enforcement actions breaks down as follows:

  • approximately in $119 million in civil penalties (this includes the $100 civil penalty in the MTS matter – by far the largest civil penalty ever imposed in an FCPA enforcement action); and
  • approximately $911 million in disgorgement and prejudgment interest.

In other words, approximately 88% of SEC corporate FCPA settlement amounts in 2019 consisted of disgorgement and prejudgment interest.

By way of comparison:

  • in 2018, 92% of SEC corporate FCPA settlements consisted of disgorgement and prejudgment interest;
  • in 2017, 82% of SEC corporate FCPA settlements consisted of disgorgement and prejudgment interest;
  • in 2016 96% of SEC FCPA settlements consisted of disgorgement and prejudgment interest;
  • in 2015 51% of SEC FCPA settlements consisted of disgorgement and prejudgment interest;
  • in 2014 99% of SEC FCPA settlement amounts in 2014 consisted of disgorgement and prejudgment interest;
  • in 2013 98% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest;
  • in 2012 86% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest;
  • in 2011, 94% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest; and
  • in 2010, 96% of SEC FCPA settlement amounts consisted of disgorgement and prejudgment interest.

Given the above numbers, it is noteworthy that the Supreme Court in 2020 will consider the following question:

“Whether the Securities and Exchange Commission may seek and obtain disgorgement from a court as “equitable relief” for a securities law violation even though this Court has determined that such disgorgement is a penalty.”

(See here for the prior post).

If one tries to analyze why some SEC FCPA enforcement actions in 2019 included a civil penalty, disgorgement and prejudgment interest (Deutsche Bank, Juniper Networks, Quad Graphics, Barclays, Westport Fuel,), whereas other enforcement actions included only disgorgement and prejudgment interest (Ericsson, Microsoft, Technip, Walmart, Cognizant, and Fresenius), whereas other enforcement actions included only a civil penalty (Telefonica and MTS) good luck and please enlighten us all with your insight.

Corporate vs. Individual Actions

Of the 13 corporate SEC FCPA enforcement actions in 2019, 2 (15%) have involved, at present, related SEC FCPA charges or findings against company employees. Stated, differently 85% of SEC corporate enforcement actions lack any related SEC charges or findings against company employees.

By way of comparison:

  • of the 7 corporate SEC FCPA enforcement actions from 2017, 1 (14%) involved related SEC charges or findings against company employees;
  • of the 24 corporate SEC FCPA enforcement actions from 2016, 7 (29%) involved related SEC charges or findings against company employees;
  • in 2015 of the 9 corporate SEC FCPA enforcement actions 2 (22%) involved related SEC charges or findings against company employees;
  • in 2014 of the 7 corporate SEC FCPA enforcement actions, 0 (0%) involved related SEC charges or findings against company employees;
  • in 2013 of the 8 SEC corporate FCPA enforcement actions 0 (0%) involved related SEC charges or findings against company employees;
  • in 2012, of the 8 SEC corporate FCPA enforcement actions 0 (0%) involved related SEC charges or findings against company employees;
  • in 2011, of the 13 SEC corporate FCPA enforcement actions 2 (15%) involved related SEC charges or findings against company employees; and
  • in 2010, of the 19 SEC corporate FCPA enforcement actions 3 (15%)  involved related SEC charges or findings against company employees.

Voluntary Disclosures

Of the 13 corporate SEC FCPA enforcement actions from 2018, 6 (46%) were the result of a voluntary disclosure.

By way of comparison:

  • of the 14 corporate SEC FCPA enforcement actions from 2018, 6 (43%) were the result of voluntary disclosure;
  • of the 7 corporate SEC FCPA enforcement actions from 2017, 1 (14%) was the result of voluntary disclosure;
  • of the 24 corporate SEC FCPA enforcement actions from 2016, 8 enforcement actions (33%) were the result of corporate voluntary disclosures;
  • of the 9 corporate SEC FCPA enforcement actions from 2015, 3 enforcement actions (33%) were the result of corporate voluntary disclosures;
  • of the 7 corporate SEC FCPA enforcement actions from 2014, 4 enforcement actions (57%) were the result of corporate voluntary disclosures;
  • of the 8 corporate SEC FCPA enforcement actions in 2013, 3 enforcement actions (38%) were the result of corporate voluntary disclosures;
  • of the 8 corporate SEC FCPA enforcement actions in 2012 4 (50%) were the result of corporate voluntary disclosures; and
  • of the 13 corporate SEC FCPA enforcement actions in 2011 11 (85%) were the result of corporate voluntary disclosures.

This remainder of this post provides an overview of SEC FCPA enforcement in 2019.

Ericsson (Dec. 6th)

See here and here for prior posts.

Charges:  Civil complaint charging violations of the FCPA’s anti-bribery, books and records and internal controls provisions.

Settlement: $540 million in disgorgement and prejudgment interest.

Origin: SEC investigation.

Individuals Charged: No

Related DOJ Enforcement Action: Yes

Barclays (September 27)

See here and here for prior posts.

Charges:  None (administrative order findings violations of the FCPA’s books and records and internal controls provisions)

Settlement: $6.3 million ($3.8 million in disgorgement; prejudgment interest of $984,000; and a $1.5 million civil penalty).

Origin: Voluntary disclosure.

Individuals Charged: No

Related DOJ Enforcement Action: No.

Westport Fuel Systems (September 27)

See here and here for prior posts.

Charges:  None (administrative order findings violations of the FCPA’s anti-bribery provisions, books and records and internal controls provisions)

Settlement: $4 million (disgorgement of $2.35 million, prejudgment interest of $196,000 and a $1.5 million civil penalty).

Origin: SEC inquiry/subpoenas.

Individuals Charged: Yes.

Related DOJ Enforcement Action: No.

Quad Graphics (September 26)

See here and here for prior posts.

Charges:  None (administrative order findings violations of the FCPA’s anti-bribery provisions, books and records and internal controls provisions)

Settlement: $10 million ($6.94 million in disgorgement, $960,000 in prejudgment interest, and a $2 million civil penalty).

Origin: Voluntary disclosure.

Individuals Charged: No

Related DOJ Enforcement Action: No.

TechnipFMC (September 19)

See here for a prior post.

Charges:  None (administrative order findings violations of the FCPA’s anti-bribery provisions, books and records and internal controls provisions)

Settlement: $5.06 million (disgorgement of $4,427,194 and prejudgment interest of $734,712).

Origin: The company disclosed that it “received an inquiry” from the DOJ/SEC.

Individuals Charged: No

Related DOJ Enforcement Action: Yes.

Juniper Networks (August 29)

See here and here for prior posts.

Charges:  None (administrative order findings violations of the FCPA’s books and records and internal controls provisions)

Settlement: $11.7 million ($4 million in disgorgement, $1.245 million in prejudgment interest, and a $6.5 million civil penalty).

Origin: The SEC’s order is silent on this topic, but the following sentence from the order suggests that there was no voluntary disclosure: “Juniper’s cooperation included timely disclosure of facts developed during an internal investigation initiated after learning of the investigation being conducted by Commission staff.” Moreover, Juniper’s original disclosure of its FCPA scrutiny in mid-2013 stated: “The U.S. Securities and Exchange Commission and the U.S. Department of Justice are conducting investigations into possible violations by the Company of the U.S. Foreign Corrupt Practices Act.” However, the company’s blog post announcing last week’s enforcement action stated that the company “entered into an administrative settlement with the SEC that resolves an internal and government investigation with respect to matters involving the FCPA that Juniper Networks self-reported.”

Individuals Charged: No

Related DOJ Enforcement Action: No

Deutsche Bank (August 22)

See here and here for prior posts.

Charges:  None (administrative order findings violations of the FCPA’s books and records and internal controls provisions)

Settlement: $16.2 million (disgorgement of approximately $10.8 million, prejudgment interest of approximately $2.4 million; and a civil monetary penalty of $3 million).

Origin: Likely industry sweep after JPMorgan became the subject of FCPA scrutiny.

Individuals Charged: No

Related DOJ Enforcement Action: No

Microsoft (July 22)

See here and here for prior posts.

Charges:  None (administrative order findings violations of the FCPA’s books and records and internal controls provisions)

Settlement: $16.5 million (disgorgement of $13,780,733 and prejudgment interest of $2,784,417)

Origin: Unclear from the resolution documents.

Individuals Charged: No

Related DOJ Enforcement Action: Yes

Walmart (June 20)

See herehere and here for prior posts

Charges:  None (administrative order findings violations of the FCPA’s books and records and internal controls provisions)

Settlement: $144 million in disgorgement prejudgment interest

Origin: The DOJ NPA states: “The Defendant did not receive voluntary disclosure credit because it did not voluntarily and timely disclose, through the Parent Company, to the Fraud Section and the Office the conduct … Although the Parent Company disclosed the conduct related to Brazil prior to the Fraud Section or the Office learning of that conduct, such disclosure was after the Fraud Section and the Office had already begun investigating the Parent Company relating to conduct in another country.” The SEC order states: ““Walmart made an initial self-disclosure of the potential FCPA violations in Mexico to the Commission’s staff in November 2011, after it retained outside counsel to conduct an internal investigation under the direction of the Audit Committee of Walmart’s Board of Directors. Subsequently, Walmart voluntarily expanded its investigation and disclosed its findings concerning Brazil, China, and India to the Commission staff, although such disclosure was after the Commission staff had already begun investigating the Company related to conduct in Mexico.” Walmart’s 8-K filing on the day of the enforcement action states: “As previously reported, the Audit Committee of the Board of Directors (the “Audit Committee”) of Walmart Inc. (the “Company”) conducted an internal investigation into, among other things, alleged violations of the U.S. Foreign Corrupt Practices Act (“FCPA”) and other alleged crimes or misconduct in connection with the Company’s foreign subsidiaries, including Wal-Mart de México, S.A.B. de C.V., and whether prior allegations of such violations and/or misconduct were appropriately handled by the Company. In November 2011, the Company voluntarily disclosed that investigative activity to the U.S. Department of Justice (the “DOJ”) and the Securities and Exchange Commission (the “SEC”), with the DOJ and the SEC opening related investigations of the Company. The Audit Committee and the Company also investigated allegations of FCPA violations in foreign subsidiaries in Brazil, India, and China, and engaged outside counsel from a number of law firms and other advisors who assisted the investigation of all of these matters.”

Individuals Charged: No

Related DOJ Enforcement Action: Yes

Telefonica Brasil (May 9)

See here and here for prior posts.

Charges:  None (administrative order findings violations of the FCPA’s books and records and internal controls provisions)

Settlement: $4.125 million civil penalty.

Origin: The company previously disclosed: “The Company is currently conducting an internal investigation regarding possible violations of applicable anticorruption laws. The Company has been in contact with governmental authorities about this matter and intends to cooperate with those authorities as the investigation continues. It is not possible at this time to predict the scope or duration of this matter or its likely outcome.” The SEC order states: “Telefônica Brasil’s cooperation included timely sharing of facts developed during the course of an internal investigation by its board and voluntarily producing and translating documents.”

Individuals Charged: No

Related DOJ Enforcement Action: No

Fresenius  (March 29)

See here for a prior post

Charges:  None (administrative order finds violations of the FCPA’s anti-bribery, books and records and internal controls provisions)

Settlement: $147 million in disgorgement and prejudgment interest

Origin: Voluntary disclosure

Individuals Charged: No

Related DOJ Enforcement Action: Yes

MTS  (March 6)

See here and here for prior posts

Charges:  None (administrative finds violations of the FCPA’s anti-bribery, books and records and internal controls provisions)

Settlement: $100 million civil penalty

Origin: The related Uzbekistan matters (MTS, Telia, and Vimpelcom) began with foreign media reporting

Individuals Charged: No

Related DOJ Enforcement Action: Yes

Cognizant Technology Solutions  (Feb. 15)

See herehere and here for prior posts

Charges:  None (administrative order findings violations of the FCPA’s anti-bribery, books and records and internal controls provisions)

Settlement: $25 million in disgorgement and prejudgment interest

Origin: Voluntary disclosure

Individuals Charged: Yes

Related DOJ Enforcement Action: Yes

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